Which of the following describes what a company should do to create a range forward contract in order to hedge foreign currency that will be received?
A. Buy a put and sell a call on the currency with the strike price of the put higher than that of the call
B. Buy a put and sell a call on the currency with the strike price of the put lower than that of the call
C. Buy a call and sell a put on the currency with the strike price of the put higher than that of the call
D. Buy a call and sell a put on the currency with the strike price of the put lower than that of the call
B
The company wants to ensure that the price received for the foreign currency will be between K1 and K2 . It does this by buying a put option with strike price K1 and selling a call option with strike price K2 .
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Indicate whether the statement is true or false.
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